Afternoon Corn: Futures bounce back from uneven early week trade

Afternoon Corn:  Futures bounce back from uneven early week trade

After a somewhat depressed start to the week, the corn market showed a few signs of life today. The bull spread recovery continued for a second session; May-July futures finished 5-6 cents higher, while new crop positions gained 1-2 cents. Managed Money traders likely slipped back into a few longs; we believe they are net long about 380,000 contracts. Cash markets were steady with firm undertones; CIF bids were a little better up-front.

Much like Mon-Tues, there were not many early headlines to trade off. Similar to last week, the markets are in a 'hurry up and wait' vibe. Spread trade is likely to remain a major factor, eyeing the start of the Goldman Roll tomorrow. The USDA will offer up their monthly balance sheet for consideration Friday morning. Quarterly usage was a little higher than most of the underlying data would suggest, which is priming the bulls, but we doubt if the USDA makes a tremendous change to their April S&D. Possibly an upward tweak to exports, while holding feed/residual about steady? New crop statistics will not be addressed until the May WASDE. Overall, sentiment among physical traders remains high, which is keeping basis strong.

The ethanol data in the weekly EIA was a mixed bag from a market standpoint, finding a modest increase in production and draw on inventory. Production increased about 1% to a 975,000 bbl/day rate; we were looking for steady to a little lower. Over a marketing year, such a rate would utilize just under 5.2 billion bushels of corn, though the YTD average is well below that. Blender demand was steady. Despite the rise in supply, inventories still managed to see a nice drawdown of -2.2% this week to 867 million gallons. Regionally, stocks declined everywhere but at the Gulf Coast; West Coast stocks remain alarmingly low. Ethanol futures did not react much to the report; crush was little changed, maintaining 5-10 c/gal net profits.
Elsewhere, end-user markets were universally firm today. The hog market correction lasted all of two days. The weekly broiler hatchery data reflected a modest expansion in egg sets this week. The yr/yr data comparisons will be somewhat suspect, as one year ago Covid was greatly impacting markets? The weekly export sales report in the morning is expected to be relatively pedestrian; net new sales should be about 600k-900k metric tons combined old/new crop. Outside markets were relatively quiet today; the feature was a minor intraday reversal higher in Crude Oil. Weather influences remain subdued as well, though interior Brazil dryness will remain a sticking point. Planters are running in the U.S. where crop insurance allows?

In the options, volatility continues its recent downswing, falling another 1%. Players paid 2 cents average for 6,000 May $6 Calls. May/July CSO trade was active. Calendar spreads rebounded for a second day. Corn gained on the beans but was mixed versus the wheat. Technically, the charts have established new resistance levels at the post-report spike high ($5.85) in May Corn. Pre-report trade affirmed good support near $5.40. New crop Dec also confirmed trend-line support at $4.50; we suspect $5 will remain tough psychological resistance for now. CZ still has an open chart gap around the $4.80 line, which will be important to near-term price direction. It's still open, even despite some early weakness?